Car Makers in India Cut Output as Gas Prices Hurt Demand

By Anirban Chowdhury

MUMBAI – More auto makers in India are making efforts to cut production as higher gasoline prices hit demand and add to concerns about the impact of the slowing economy and high borrowing costs.

Executives at the Indian units of Toyota Motor Corp., Fiat SpA, Hyundai Motor Co., and Honda Motor Co. said they are either making fewer gasoline cars or halting production for a few days, or diverting excess stocks to overseas markets.

“We have cut production of the gasoline variants of the Etios sedan and the Liva hatchback,” said Shekar Viswanathan, deputy managing director, commercial, at Toyota’s India unit.

At Fiat India Automobiles Ltd., the plan is to suspend production for two or three days in July, said the company’s chief executive, Rajeev Kapoor.

Automobile sales in India have slowed recently, mainly due to higher interest rates and economic uncertainty. Car sales grew just 2.2% in the year through March to 2.02 million vehicles, compared with a 30% jump the previous year.

Demand for gasoline vehicles has taken the biggest hit since June 2010, when the government lifted price controls on the fuel.

Pump prices have gone up, leading many new car buyers to opt for diesel vehicles as the fuel is still sold at discounted rates.

The price gap between the two fuels has increased to more than 30 rupees ($0.54) a liter from about 10 rupees in June 2010.

Diesel vehicles accounted for 47% of total car sales in May, up from a little over 25% two years ago, according to the Society of Indian Automobile Manufacturers.

India’s biggest car maker, Maruti Suzuki India Ltd., and the local units of Nissan Motor Co., Volkswagen AG, General Motors Co. and Ford Motor Co. have already begun making adjustments to their output to clear a backlog of unsold vehicles.

Hyundai Motor India Ltd. is diverting excess output of its gasoline Eon, i10 and i20 hatchbacks to overseas markets, said Arvind Saxena, director in charge of marketing and sales.